A Cumbrian accountancy firm has issued an urgent warning to owners of Furnished Holiday Lets (FHLs).

Lamont Pridmore, based in Kendal, has cautioned FHL owners about 'significant' tax changes coming into effect in April 2025.

These changes will remove the tax advantages currently enjoyed by FHL owners, instead being taxed similarly to traditional residential property rentals.

According to Lamont Pridmore, the benefits that will be lost include capital allowances and potential eligibility for Business Asset Disposal Relief.

Expenses such as mortgage interest, which can be fully deducted from rental income, will be limited to the basic rate of Income Tax.

Capital allowances currently permit FHL owners to claim up to £1 million in capital expenditure via the Annual Investment Allowance.

Business Asset Disposal Relief offers a lower tax rate compared to Capital Gains Tax.

In addition to these changes, FHL income, presently treated as earned income and subject to relief based on the owner's highest Income Tax rate, will no longer count towards UK earnings when determining the maximum pension relief.

Graham Lamont, CEO of Lamont Pridmore, said: "The abolition of the FHL tax regime marks a significant shift for holiday home owners.

"We strongly advise property owners to seek professional guidance to navigate these changes effectively.

"Planning ahead will be crucial to mitigate potential tax liabilities."

Announced by the previous chancellor, Jeremy Hunt, the new Labour Government has confirmed that it intends to proceed with the changes.

This leaves FHL owners in a position where they must consider their options prior to the enforcement of the new rules.

This might involve selling the property and benefiting from the current lower 10 per cent Capital Gains Tax rate now.

Lamont Pridmore is on hand to advise FHL owners on the impact of the changes and to discuss feasible options moving forward.

FHL properties must meet specific criteria to qualify under the current regime, including being based in the UK or European Economic Area (EEA), and actively rented out to generate profit.

They must also be available for rental for at least 210 days annually, commercially let as an FHL for at least 105 days per year, and not exceeding 155 days per year for long-term rentals over 31 consecutive days..